After the Jobs Report: How to Get to 5.5% Unemployment

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NEW YORK (TheStreet) -- Finally, a real recovery to believe in.

It's not just that the economy created 288,000 net new jobs in June, reducing the unemployment rate to 6.1% -- its lowest since Lehman Bros. blew up in September 2008.  

The best thing about today's report isn't the top-line number -- it's the distribution of new jobs that helped the nation get there.

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In a piece last year, I said job gains would get to 250,000 a month when hiring picked up in construction (thanks to an improving housing market) and in state and local governments, as manufacturing added about 10,000 and employment in services business responded to signs that the last weak spots in the economy were finally strengthening.

And that's what happened in June. Construction companies hired just 6,000 workers according to the Labor Department, but ADP's survey of private-sector employers said Wednesday that they hired 36,000. Average the two and construction hiring is in very solid territory.

Governments, which were still more than 700,000 people short of their pre-recession peak in earl 2014, hired 22,000 people. Manufacturing added 16,000.

Better still, the underlying data suggest that construction and manufacturing employment will be steadily gaining later this year. A 19% gain in May new-home sales, coupled with a 6.1% rise in contracts to sell existing homes, shows confidence in housing rebounding.

And purchasing managers survey data and individual respondents' answers show confidence among manufacturers that will lead to more hiring, says Brad Holcomb, chairman of the manufacturing purchasing managers' survey for the Institute of Supply Management.

The next step is to push unemployment down to 5.5% -- around the top of the narrow range economists consider full employment. It's coming sooner than you think -- sooner than the Federal Reserve's public forecasts indicate, for sure.